Millennials struggling to get a financial foothold in a challenging economic environment are resorting to a range of alternative banking providers to find the lower, more transparent fees and convenient access they need.
According to a study from Think Finance, Millennials are using a mix of traditional and alternative financial services to meet their needs. While nearly all (92%) Millennials report that they currently use a bank, almost half (45%) indicate that they have supplemented their banking activities with with some form of alternative financial product or service — e.g., prepaid debit card, money transfer service, check cashing, pawn shop, payday loan, etc. — within the past year. Additionally, an overwhelming majority of Millennials who have used alternative financing (81%) say that having emergency credit options available are at least somewhat important to them; less than half of respondents said they have an emergency savings fund of at least $1,000.
When asked why they turn to alternative financial services, Millennials who have used them identify the products as more convenient (42%), point to lower or more predictable fees (31%), and report that the products generally better meet their needs (30%).
Among those who use alternative products and services, the majority rate their experiences as generally positive. At least two-thirds of Millennials report having a very or somewhat positive experience using each product (positive ratings ranged from 67 – 92%, depending on the product).
( Read More: What Gen-X And Gen-Y Really Think About Banks )
What Millennials Want from Financial Services
Perhaps unsurprisingly, a strong majority of Millennials (83%) report that the most important factors to consider when choosing a financial services provider are fee-related. 69% identify “no surprise fees,” 56% cite “no or low fees,” 48% say “easy to understand fees” and 43% point to “no overdraft fees” as the most important factors when choosing a bank or other financial services provider.
More than half of all Millennials say convenient branch locations are still important to them.
Millennials also expect technology access to financial services, with more than half of Millennials indicating that their preferred way to handle their banking needs is through their bank’s website (56%). 59% say online access to accounts is important; however, a similar proportion cite convenient branch locations (55%) and 24/7 access to money (55%) as important. Additionally, usage of mobile applications for managing finances is emerging with 29% reporting that they currently use a mobile app to help manage their money.
Millennials Worried about their Financial Future
The Millennial generation, notoriously plagued with high levels of student loan debt, is facing a bevy of long-term financial concerns. 59% of applicable respondents worry that they’ll never be able to escape student loan debt.
Nearly two-thirds of Millennials worry that they will have trouble paying their rent or mortgage.
Having enough money for retirement is the issue Millennials worry about the most, with 73% reporting that they are very worried, worried or somewhat worried it. The prospect of dealing with an expensive health-related issue came in a close second (71%).
64% of Millennials have some level of worry that they will have trouble affording their rent or mortgage, and the same percentage worry that they’ll never be able to buy a home.
Determined to Succeed Despite Challenges
When asked about their perceptions of the economy and opportunities for achieving personal and financial success in today’s environment, most Millennials have a rather downbeat perspective. 81% say the state of the economy is only fair or poor, while 67% say it will stay the same or get worse in the coming year.
77% of Millennials feel that it is very difficult to find a well-paying job, with 64% of employed respondents saying they feel underpaid for the work they do.
70% of Millennials agree that it was easier for their parents’ generation to achieve the American Dream than for their own generation, and 60% say their parents’ generation also had better opportunities for career advancement.
Despite these negative perceptions, most Millennials still feel that they will succeed in the long run. 63% say they will be more financially successful than their parents, 55% expect their personal financial condition to be better one year from now than it is today, and 79% believe things will be better in 10 years.
“The economy is slowly improving, but it’s still a tough time to be starting a career and saving for the future,” said Ken Rees, President and Chief Executive Officer, Think Finance. “There is a clear desire among the Millennial generation for financial flexibility and the ability to access credit in a pinch. It’s also clear that traditional banking products are not meeting all of Millennials’ financial needs and that innovative, responsible alternatives are in demand.”
The survey was conducted online within the United States by Harris Interactive on behalf of Think Finance from April 25 through May 7, 2013 among 1,021 Millennials (ages 18-34).